Coal block allocation letter constitutes property under PMLA: Delhi High Court

The Delhi High Court on Friday held that a coal block allocation letter constitutes “property” within the meaning of the Prevention of Money Laundering Act (PMLA) [Directorate of Enforcement v M/s Prakash Industries Limited and Anr]. 

A Division Bench of Justices Anil Kshetarpal and Harish Vaidyanathan Shankar said that the coal block allocation letter is an instrument evidencing a right or interest to obtain a mining lease from the government and extract coal through its utilisation. 

As per the definition of property provided under Black’s Law Dictionary and Section 2(1)(v) of the PMLA, such a right, once exercised and converted into economic gain, becomes a form of property, the Court noted.

“Since the allocation letter enabled the commission of money laundering, the letter is not only relevant but also constitutes property involved in money laundering under the scheme of the [Prevention of Money Laundering] Act,” the Court said. 

Further, the Bench held that in the modern era, intangible property has assumed immense legal and commercial significance, and the definition of property must be viewed through a wide legal lens. 

“In the modern era, as also evidenced by the usage of terms to define property under Section 2(1)(v) of the PMLA, intangible property has assumed immense legal and commercial significance. The evolution of Intellectual Property laws now comprehends rights such as copyrights, trademarks, design rights, patents, licenses, digital assets and contractual entitlements, all of which are firmly recognised as valuable forms of property within the framework of common law,” the Division Bench said. 

In doing so, the Court overturned a single-judge’s judgment of July 2022, which had held that mere allocation of coal block cannot be termed as proceeds of crime under the PMLA. 

The single-judge had rendered the findings on a plea filed by Prakash Industries Limited (PIL) challenging a provision attachment order (PAO) issued by the Enforcement Directorate (ED). This order was then placed for confirmation before the Adjudicating Authority (AA), which issued notices to the companies. These proceedings were challenged before the High Court.

PIL had been allocated the Chotia Coal Block in 2003 but the allocation was later cancelled by the Supreme Court on the ground that allocation was obtained through misrepresentation. Criminal proceedings followed and the CBI registered a case against PIL. The ED also initiated money laundering probe against the firm. 

It was PIL’s case that the allocation itself was neither property nor proceeds of crime, but merely a right conferred to seek a mining lease. As a result, such allocation cannot be attached under PMLA. 

The single judge agreed with the argument and set aside the PAO and the related proceedings. 

However, the Division Bench overturned the same and upheld the PAO. 

The Court said that obtaining the allocation letter through criminal activity and subsequently obtaining financial benefits from such allocation leads to generation of proceeds of crime and amounts to the offence of money laundering. 

“The coal block allocation letter obtained through such criminal activity conferred valuable rights in favour of PIL which enabled the party to secure mining leases from the government and subsequently undertake coal excavation. As a result, it led PIL to obtain financial benefits in the form of profits earned from the extraction and sale of coal or through the usage of the  misrepresentation in financial benefits to substitute or derive assets, which qualifies as proceeds of crime within the meaning of Section 2(1)(u) of the PMLA,” the Court said. 

It added that ED was justified in attaching the value of coal extracted by PIL. 

Further, the Court said that the date of the predicate (scheduled) offence, alleged misrepresentation/fraud to obtain the coal block, is not the cut-off for enforcement under PMLA. 

The Division Bench held that the offence of money laundering is continuing in nature and the offence persists as long as the proceeds of crime are possessed, used, concealed or projected as untainted.

“In view of the aforestated, the financial benefits derived by PIL post-allocation, such as coal extraction, commercial exploitation, profit generation, or any asset substitution, form part of the economic chain flowing from the alleged tainted allocation. These are squarely within the scope of the Directorate‟s jurisdiction under the PMLA. Therefore, the Directorate is legally justified in extending its actions beyond the pre-allocation phase, and the artificial cut-off date of 04.09.2003 cannot be used to curtail its statutory mandate.”

Special Counsel Zoheb Hossain, Panel Counsel Vivek Gurnani along with advocates Pranjal Tripathi, Kartik Sabharwal and Sheikh Raqueeb appeared for ED. 

Senior Advocate Kapil Sibal with advocates Shivam Tandon, Ankur Chawla, CB Bansal, Gurpreet Singh, Aamir Khan and Atif Akhtar represented Prakash Industries. 

Senior Advocate Dayan Krishnan with advocates Ankur Chawla, Chander B Bansal, Gurpreet Singh, Jatin S Sethi, Bukul Jain, Kunal Aggarwal, Shivam Bansal and Yash Pandey appeared for Hi-Tech Mercantile India Pvt Ltd. 

[Read Judgment]